--- title: "EOR or Entity in California" description: "Compare EOR and entity setup in California, with real franchise tax and formation costs, so you can pick the right path with Teamed." canonical: https://www.teamed.global/country-hiring-guides/united-states/california/eor-vs-entity --- ![California business district.](/cluster-assets/country-hiring-guides/united-states/california/eor-vs-entity/images/hero.webp) # Should you hire through an EOR or openan entity in California. In California, an EOR lets Teamed employ your staff immediately, no entity, no franchise tax, no state filings, while you keep control of the work. Served by Teamed US Inc., Delaware · Payroll via SUNA Solutions Last reviewed 22 September 2026 · California guide At a glance ## The real cost of a California entity California charges a flat minimum franchise tax of $800 to corporations doing business in the state, on top of a formation fee of $70 to register with the Secretary of State. Those figures apply whether you hire one person or fifty, which is exactly why the decision hinges on headcount and time horizon, not on the paperwork alone. Minimum franchise tax$800 Franchise tax basisflat Formation / registration fee$70 How the choice actually works ## Two paths, one hire When you use an EOR, Teamed is the legal employer of record in California. Your new hire signs a compliant contract, gets paid correctly, and works for you day to day, while Teamed carries the registration, tax, and filing obligations that come with having payroll in the state. When you form your own entity, you take on those obligations directly. California's minimum franchise tax is charged annually and flat, at $800, regardless of profit, so a small local presence pays the same base tax as a larger one. The $70 formation fee is a one-time cost to register the entity itself, but it is only the entry ticket, the franchise tax is the ongoing commitment that matters more. Why the math shifts over time ## When an entity starts to make sense An entity tends to make sense once you have enough people on the ground that the fixed costs of running California payroll and tax filings are clearly worth it against the ongoing $800 franchise tax. Before that point, most of that cost is dead weight against a headcount too small to justify it. Rather than guessing at a headcount threshold, run your actual salaries and expected stay through the crossover calculator. It depends on salary levels and how long you intend to keep people in California, not on a fixed number of employees. Before you commit ## Sometimes an employer of record is the better fit An employer of record is sometimes the better answer, not a compromise, when your California team is small, still changing shape, or you are simply testing the market before committing. Talk to a member of the team about your specific plan, and run the numbers through the crossover calculator before deciding either way. Contractors, employer of record and your own entity all run on one platform at Teamed, so moving between them later does not mean changing provider or re-onboarding anybody. Real HR and legal experts handle the work rather than a ticket queue. Talk to a member of the team and we will tell you plainly which one suits where you are. If you would rather look at the numbers yourself first, the crossover calculator models it on local salaries and employer costs rather than on a headcount rule of thumb. Talk to a member of the team Model the crossover for the United States Who carries it ## Your own entity, when it's time. We set it up, migrate you in, and hand it back intact. Global Entity and Employment Operations, which we call GEMO, is how Teamed forms your company, registers it for tax and payroll, runs it month to month and keeps its filings current, across 100+ countries. You stay the employer. We do the work behind it. In California, that means Teamed registers your entity, gets it compliant with the state's franchise tax and filing requirements, and transitions your existing EOR employees onto its payroll without a gap in their employment. You end up with a clean, fully yours entity, built the way California expects it to be run, available in the same 100+ countries as the rest of Teamed's Global Entity and Employment Operations (which we call GEMO) coverage. Entity Management (GEMO) The Graduation Model Employer cost calculator > They set up our EU entity and moved hires across without missing a payroll. *Helene Dubois, COO* Talk to an expert about California Questions ## Common questions about EOR versus entity in California Does an EOR avoid California's franchise tax? Yes. The $800 minimum franchise tax applies to a corporation registered to do business in California, and using an EOR means Teamed is the registered employer, not you. You only face that tax once you form your own entity there. How much does it cost to set up a California entity? The California Secretary of State charges a $70 formation fee to register the entity. On top of that, the entity owes the $800 minimum franchise tax annually, which is a flat amount regardless of size or profit. Is the $800 franchise tax a one-time cost? No, it is an annual minimum tax, charged every year the entity is registered to do business in California. The $70 fee, by contrast, is the one-time cost of the initial formation filing. When should I switch from an EOR to my own California entity? There is no fixed headcount that triggers the switch, it depends on your salary levels and how long you plan to keep staff in California. Use the crossover calculator to weigh the $800 annual franchise tax and ongoing compliance work against what an EOR arrangement costs you. Can Teamed help set up the entity later if I start with an EOR? Yes. Teamed's GEMO service sets up the California entity, migrates your EOR-employed staff onto it, and hands you a fully operational entity, so starting with an EOR does not close off that path. Where these figures come from ## Sources Figures in this page come from the California Franchise Tax Board's Publication 1060 and the California Secretary of State's business entity forms and fees. ## More on entities in California - [Hiring in California, overview](/country-hiring-guides/united-states/california)parent - [California setting up](/country-hiring-guides/united-states/california/entity-setup)sibling - [California running costs](/country-hiring-guides/united-states/california/entity-running-costs-and-filings)sibling - [California tax presence](/country-hiring-guides/united-states/california/permanent-establishment-risk)sibling - [California moving from an eor](/country-hiring-guides/united-states/california/moving-from-eor-to-your-own-entity)sibling - [Set up an entity, by country](/entity-setup-by-country)hub - [Entity Management (GEMO)](/entity-management)core - [Talk to an expert about California](https://www.teamed.global/contact?from=eor-vs-entity)CTA